The effect of "area of residence" (e.g., urban-rural) on the utilization of medical services has often been attributed to the availability of services. Many policy decisions based on this interpretation have led to the expending of considerable resources in an attempt to redistribute manpower and facilities. The purpose of this research is to show that the evidence for such an interpretation is ambiguous and that the source of the ambiguity lies at least partially if not wholly in the fact that many of the independent variables used in a utilization model covary with the "area of residence" variable. This research is therefore directed specifically toward the identification of the interrelationships and interaction effects of the independent variables and in so doing isolate the direct effect of "area of residence." To the extent that interaction does exist, only as exposure of the variables that are interactive will allow the identification of independent (variable specific) populations and provide vital guidance for policy decisions. Using data from the 1970 Health Interview Survey (HIS) of the National Center for Health Statistics (NCHS), an overall conceptual model of utilization will be developed. The interacting variables of the next stage of analysis. A final reduced model will be developed through several stages of analysis to where the important interacting population characteristics can be identified through the analysis of n-way interaction effects. With the interactive effects isolated by the final cell specification, the effect of "area of residence" can be tested within each cell. The results will indicate the extent to which consideration of population characteristics should be considered in specific combinations relative to the "area of residence."